Hotel rooms hit record high as occupancy continues to tumble

Australia’s hotels surpassed 300,000 rooms for the first time in November, data analysts STR report.

We now rank 12th in the world for total room count and fourth in Asia Pacific, boasting 5,600 hotels offering 300,229 rooms and showing no signs of a development slowdown.

The news comes as STR preliminary data for November shows a 23rd consecutive month of occupancy declines for the nation’s biggest market, Sydney – although the data analysts “partially attribute” the fall to significant bushfires burning around the country. Supply was shown to increase by 1.9 percent year on year across the city, while occupancy dropped by 3.4 percent to 86.5 percent and revenue per available room tumbled 7.2 percent to $202.

STR defines a traditional hotel on three criteria:

1) It generates revenue on a nightly per-room basis,

2) It has 10 or more rooms and

3) It is open to the public (excludes those properties requiring membership, affiliation or club status).

Matthew Burke, STR’s regional manager for the Pacific, says the proliferation of hotel rooms reflects the industry’s strong performance, and that soft occupancy and RevPAR figures will be countered in the longer term by demand growth.

 “Australia has been on a progressive development path since 2016 with more than 26,000 rooms added to the marketplace,” he said.

“That is not counting the more than 5,000 rooms that were closed during that period and converted for alternative commercial usage.

“This uptick in investment reflects the country’s strong performance, especially in major markets. As a whole, Australia’s occupancy has been at or near 75 percent for each of the last five years, and average daily rate has consistently ranged around 185 Australian dollars.”

The ten largest markets in Australia represent 57.1 percent of all rooms in the country, led by Sydney with 43,841 rooms. While each hotel class is well-represented in the country’s overall numbers, according to STR, the largest percentage of rooms sit in the upscale (24.2 percent) and midscale (23.6 percent) segments. The upscale sector has seen the largest influx of new supply with 10,931 rooms opened since 2015.

 “Australia is not likely to hit its construction peak until next year, and we don’t expect a substantial slowing in development anytime over the next several years,” Burke said.

“Melbourne, Hobart and Adelaide are projected to see the largest increase based on their existing room counts, and the two highest-tiered segments (luxury and upscale) will combine to welcome 35 percent of the new rooms in the pipeline.

Among hotel brands, Accor represents the lion’s share with 32.1 percent of rooms. The Ascott Limited is a distant second at 7.6 percent.

While there are currently an intimidating 94 projects representing 18,294 rooms under construction and 216 projects encompassing 36,005 rooms in the planning pipeline for Australia, Burke says the sector is well positioned to absorb the new supply long term.

“As we have seen in the data this past year, all of this new supply has put some pressure on occupancy levels, and subsequently, hotelier pricing confidence,” he said.

“Moving forward we anticipate demand growth in almost all markets, but with sustained supply increases, we’re still forecasting occupancy declines in the short term.

“Room rates will of course be weighed by the additional competition in the market, but that is not likely to become a long-term trend as many markets trade at high absolute occupancy levels with the ability to absorb new supply.”

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